Living Trust

11/14/2017

The goal of many estate plans is avoiding probate and a living trust is popular because of its flexibility. But, despite the ease of use and flexibility, people often get tripped up because they are totally unaware of what must be done so the trust works as intended.

Trusts can only be used to avoid probate when assets are transferred to the trust. That means that ownership must be transferred from the individual to the trust.

Some property might be exempt from probate by state laws. Accordingly, it is a good idea to check the laws in your state. For example, if cars are exempt from probate in your state, then there is no need to transfer ownership of them to a trust.

Retirement accounts do not need to be transferred to the trust. By law they will pass to the named beneficiary. Just make sure that the beneficiary designation is up to date.

Get advice on trust creation from your estate planning attorney and loop your accountant in to ensure all relevant issues are addressed.

An estate planning attorney is essential in working through the process.

10/19/2016

A living will, also known as an advanced medical directive, is important when it comes to planning for end-of-life care but, if not done well, can be ineffective as Wealth Management discusses in "What Advisors Need to Know about Living Wills."

For your living will to be effective when you need it there are a few things you should consider. In some circumstances it is a good idea to be as specific as possible in the document. Detail exactly what treatments you do and do not want to authorize in advance. In other circumstances it is better to leave those specifics to your agent in your Medical Power of Attorney.

You also need to let other people know you have a living will. If you stick it in a desk drawer without telling anyone, then no one will know to give it to medical professionals at the appropriate time.

Finally, every state has its own laws concerning living wills. In some states you must use official forms. In every state, even if official forms are not required, specific language must be included in a valid living will document.

An estate planning attorney can be helpful in guiding you in creating a plan that includes an advanced medical directive that fits your unique circumstances.

01/26/2016

The goal of many estate plans is avoiding probate and a living trust is popular because of its flexibility. But, despite the ease of use and flexibility, people often get tripped up because they are totally unaware of what must be done so the trust works as intended.

Trusts can only be used to avoid probate when assets are transferred to the trust. That means that ownership must be transferred from the individual to the trust.

Some property might be exempt from probate by state laws. Accordingly, it is a good idea to check the laws in your state. For example, if cars are exempt from probate in your state, then there is no need to transfer ownership of them to a trust.

Retirement accounts do not need to be transferred to the trust. By law they will pass to the named beneficiary. Just make sure that the beneficiary designation is up to date.

Get advice on trust creation from your estate planning attorney and loop your accountant in to ensure all relevant issues are addressed.

An estate planning attorney is essential in working through the process.

11/13/2015

Before we get to the fascinating details reported in The Wall Street Journal's "When the Superrich Die, Here's What's in Their Wallets," we need to cover a few basics. The information reported in the data sample comes from returns filed in 2014; in other words, from estates of people who died in 2013. And it should be noted that the estate tax applied to estates of individuals over $5.25 million and a top rate of 40%.

The most important thing to remember about the estate tax is that it really doesn't apply to most folks, just to a few of the very rich. Congress increased the exemption and indexed it to inflation, ensuring that almost all of the 2.6 million people a year who die in the U.S. need not worry about estate tax. That leaves just the very wealthiest in the country.

Fewer than 12,000 estate tax returns were filed in 2014—more than 50% of those didn't yield any tax for the federal government.

The data showed that the uber-wealthy don't provide much information about the ways they shift assets out of their ownership or the planning maneuvers that can decrease the size of estates prior to death. Those who died with more than $50 million (the top tier) were heavily invested in stock and closely held businesses.

Those who were rich enough to file an estate tax return–but not at the very top–relied much more heavily on retirement accounts like 401k's and real estate. The types of assets change as people get wealthier. The merely rich have houses, cash, farms and retirement accounts. The very rich have bonds and real estate. But the very, very rich own art and stocks of businesses which they often want to pass to future generations.

The richest people pass on smaller shares of their estates to their heirs and it's not merely due to the fact that more of their wealth is subject to taxation. They tend to have bigger debts and make bigger charitable contributions. Charities collected $18.4 billion from bequests from the returns filed in 2014, with 58% of that coming from just 1.4% of estate tax returns.

Whether you're "uber-rich" or "just plain folks", you can truly benefit from a discussion with a qualified estate planning attorney.

10/29/2015

State estate taxes are very different from federal tax laws, both of which are examined in "Estate taxes explained," from nj.com. Not only are state taxes difficult to understand, but they vary greatly from state to state. One local example for New Jersey readers is the unlimited marital deduction: for a married couple, the surviving spouse does not have to pay either federal or state estate taxes when the first spouse passes away.

But things can get pretty tricky quickly when you own real estate in a state or states that are not your state of residence. When you die, those other states may seek to tax your estate with their own very different state estate tax. A smart way to avoid this issue is to establish a trust to hold that property. The surest way to avoid estate taxes is to give assets away. However, that's a serious step when you might need those assets to provide for you and your family during your lifetime.

Another way would be to create an irrevocable life insurance trust. In that situation, the trust, and not you, "owns" the life insurance, and if life insurance is purchased directly into the trust, there is no waiting period. But if existing life insurance is transferred into the trust, there's a three-year wait before the life insurance is considered out of your estate.

Another way to remove assets from your estate is to establish a 529 Education Savings account with a named beneficiary. With a 529 plan, even though you're the stated "owner" of the account, it's not considered part of your estate.

Keep in mind there are only a few ways to accomplish this, so work with an experienced estate planning attorney.

09/25/2015

Here’s the basic concept behind trusts: a trust allows an individual to separate the legal ownership of property from the beneficial enjoyment of the property. In “What Is a Trust, and Why Should I Have One?” Fox Business explains the different kinds of trusts, how trusts can be used to manage and preserve property and the relationship between the trusts, the beneficiaries of the trusts and the responsibilities of the trustees.

Revocable trusts are also known as living trusts. The creators of this trust can ensure the proper management of their assets during their lifetime and after they pass. A revocable trust can be changed at any time by the creator. However, instructions in the trust document tell the trustees how to act after the creator’s death. Revocable trusts are used in estate planning to pass assets to heirs in private and to avoid probate, which can reduce costs and stress.

Testamentary trusts. These are created in a person's will and they don't keep the assets out of probate. A court proceeding is required to fund the testamentary trust. Testamentary trusts provide flexibility.

Irrevocable trusts can be used to make gifts that allow subsequent protection from creditors and estate taxation. These trusts are typically created to hold high-value life insurance policies and keep the insurance proceeds out of the taxable estate of the insured person. The trust languagecan state that any trust money used for the beneficiary won't run into issues with Medicaid and Supplemental Security Income.

Charitable trusts, as the name implies,allows an individual to make a gift to charity but retain an interest in the donated property. Charitable remainder trusts will let you keep an income stream that continues for a specific time or for the rest of your life—the charity will receive any remaining funds at your death. These trusts provide income tax benefits from the value of the donation, even though you still receive income from the trust assets.

Other trusts are used for estate planning purposes, such as credit shelter trusts. These are used to preserve the estate tax exemption of a deceased spouse for future use. A Qualified Terminable Interest Property trust, or QTIP, gives a spouse access to funds while preserving their eventual distribution to children or other heirs. Finally, a Qualified Personal Residence Trust, or QPRT, lets you transfer an interest in your home to family members while you are still alive in a way that reduces gift and estate taxes.

All of these trusts have the same benefit: guaranteeing that your assets will be used to meet your wishes and provide income for you and your loved ones. Talk with an experienced estate planning attorney and see if you can benefit from establishing a trust for yourself or your family.

09/11/2015

For parents watching helplessly while adult children struggle with mental illness and addition, there is another layer of worry. What will happen when the parents are no longer alive? In“For Parents With Troubled Adult Children, Financial Hurdles Abound,”The New York Times examine the financial challenges of helping loved ones stricken with mental illness. The solution must provide for care without placing assets in the ill person’s control, must not jeopardize their government benefits and must not worsen their condition. One solution is the special purpose trust.

A special-purpose trust is different from a special-needs trust, which is frequently implemented to pay for additional needs of those receiving government benefits where the government has strict restrictions on the recipient’s assets. A special-purpose trust can be used to provide children more of the life they might have enjoyed without mental illness or addiction, and it allows the parents the flexibility to make changes with the distributions.

Special-purpose trusts are more complicated to establish than regular trusts because of the powers they give to the trustees and the restrictions they place on distributions. However, the toughest part of creating a special-purpose trust is getting parents to accept them as necessary: parents must first acknowledge that their children will never fully recover.

Parents are advised to set out some very specific criteria for distributions into trust documents, for example, staying on medication or staying sober for a certain period of time. In addition, those with a family history of mental illness and addiction issues should get a power of attorney and health care proxy for children over 18 who are away at college. In the event that something happens to their child, the parents will have access to medical records and will be able to help.

Work through these issues with an experienced estate planning attorney to make sure that you are doing your best to help your child.

09/02/2015

The state of Florida enacted laws to authorize the establishment of pet trusts in 2003, allowing petowners to plan for the care and maintenance for their pet’s lifetime. An article in The Naples Daily News, “Pet Trusts Gaining Popularity.” explains the fundamental issues involved.

Now almost every state recognizes these trusts (which vary in each state). A named trustee will typically be responsible for the investment, management and distribution of the trust assets. Another individual is named as the pet’s caregiver to avoid potential conflict of interest. The trust will include details for caregivers, medical needs, and the final arrangements for the pet’s death.

You should speak with a qualified estate planning attorney because estate taxes and other expenses attributable to the trust will need to be considered when drafting a pet trust. Planning for your pets can be an important part of your estate planning process. Make sure that all members of your family—including your pets—are cared for in your estate plan.

08/27/2015

According to financialplanning.com’s post “Should Estate Plans Rely on Trusts?,” people structure their estate plan to include trusts for a number of reasons. In some instances, the trust functions as a contingent beneficiary, usually when there are minor children involved, and the trust assigns a guardian for the children until they come of age. Assets held in trust are not subject to probate at death, which is useful if a person owns property in multiple states, thereby avoiding probate in each state.

Implementing a trust provides control for assets in the event of incapacity. A co-trustee or successor trustee will take over the management of the trust assets. Another nice thing about a trust is that it gives you maximum privacy, where a will is public record and open to all.

Trust language can be drafted to reduce or eliminate estate taxes, as well as to protect from divorce settlements and creditors. In addition, a trust can protect dependents with special needs. Ask your estate planning attorney about a special needs trust for your child with special needs—or about the other types of trusts that might benefit your circumstances.

An individual can use trusts in one of two ways. Some people will grant title assets to a trust while alive, and then the living trust terms will stipulate the distribution of trust assets at the grantor’s death. Other folks don’t have a standalone living trust; instead, they use a testamentary trust which is funded through a will.

Contact a qualified estate planning attorney to help you decide which way to go.

08/26/2015

The biggest problem that results from failing to address estate planning in a timely manner is simple: it often leaves loved ones with a mess to clean up that can be expensive, time consuming and very public. The Street’s “Mistakes You Need to Stop Making,” takes readers to task for putting this necessary responsibility on the backburner. Three basic estate planning mistakes that are more common than you would think:

Mistake 1: Not Signing a Will

Even those who are proactive in their planning sometimes forget to dot the I’s and cross the T’s—some people, for example, write a will but never actually sign it! This becomes a priority only after a health crisis or another life change. That's risky! It’s really important to have a signed will in place before something urgent arises.

Mistake 2: Tax Faux-Pas

Federal estate tax laws exempt taxes on estates with assets under $5.43 million per person, but some people with assets less than the threshold think they're exempt from estate planning. Not so! There are a number of other benefits for estate planning. This includes avoiding financial disputes about the inheritance, protecting assets from creditors and lawsuits, and donating to charity. In addition, state estate tax is part of the process, too. Your state might have a much smaller estate tax exemption limit.

Mistake 3: Negligence/Being Out-of-Date

Failing to keep your estate plan up-to-date is another dangerous mistake. Make sure that you do a review with your estate planning attorney any time a major life event happens, for example, divorce, a death in the family or the birth of a grandchild.

Talk with a qualified estate planning attorney and avoid these estate planning mistakes.